Toyota is looking like it will earn a mere $US200 million from October 1 to March 30 next year, which would be tantamount to running at a loss for a global giant.
The company yesterday revealed that it had cut its 2009 profit forecast to $US6.1 billion (depending on exchange rates), a massive 69% reduction.
But seeing it had already earned $US5.9 billion of that in the first half, the company will run close to break-even, or at losses over the next few months as the global economic crisis crimps business.
Tonight though we will see some real red ink with quarterly reports due from General Motors and Ford. Both will be unmitigated disasters and will raise questions about whether they will be still with us this time in 2009.
News that the IMF has slashed its growth forecasts for 2009 for the developed world to a contraction of 0.3% (from growth of 0.5% a month ago in its major forecast), means that for global carmakers like Toyota (and News Corp, which forecast a “mid-teens” drop in 29009 earnings after earlier forecasting a 4%-6% rise), there will be no good news at all for the next 15 months.
The IMF sees the US, Europe and the UK as being recessed for most of 2009, with negative growth for most of that time.
These industries, like banking and finance are going to be shrunk by the great deleveraging going on now around the world. For car giants like GM and Ford it’s happening at a time when they are weak; for Toyota it’s happening at a time when the carmaker seems to have drifted from its normal nimble path and been infected by the US big car disease that has damaged its rivals.
Toyota also cut its 2009 vehicle sales forecast: “TMC estimates that consolidated vehicle sales for the fiscal year ending March 31, 2009 will be 8.24 million, a decrease of 673 thousand vehicles compared to the last fiscal year. This figure is a revision to the previous forecast announced in August 2008.” That’s a cut of 7.5%, but won’t be the last time that falls, given the way car sales are slumping in the US and now Europe and Asia.
Toyota blamed the slump in the US market and the impact of the higher yen which has slashed profits at its Japanese factories.
The news from the world’s biggest car group was worse than forecast by Japanese brokers.
Like so many global and multinational companies, the financial crisis missed them only to hit them hard as it turned into an economic slump and started destroying demand for their products.
Australia’s resources giants were in the same position, but from the other end of the production chain. The news from Toyota and its other rivals is bad news for the likes of BHP Billiton and Rio Tinto: Japan won’t want as much steel next year and that means it will want less iron ore and coal and other resources, which means it will insist on paying a lot less.
It came after rivals Honda and Nissan cut their forecasts for 2009 after reporting worse than expected first half profits. Both have also cut production and sales forecasts. Honda cut earnings forecasts for 2009 by 42%, Nissan lowered its expected result by 51%: that leaves Toyota with the unwanted crown as the biggest maker, with the most to lose.
Mitsuo Kinoshita, Executive Vice President, said in a statement that profits would likely remain at depressed levels next year as a result of weak US demand. “This environment is more severe than anything we have ever experienced,” he said. “Honestly, it is difficult to foresee when it will bottom out.”
Toyota suffered operating losses at both its US and European operations in the quarter to September and sales fell globally for the first time in seven years. Growth in emerging markets such as China and Russia – which have acted as a cushion for manufacturers so far – also started slowing. Second quarter earnings fell 69%, setting the tone for the rest of the year.
US sales of cars and light trucks sank to their lowest level in 30 years last month, despite dealer and manufacturer discounts and financing deals to try and clear unsold vehicles. Toyota sales slumped 23%, but that wasn’t as bad as Nissan over 30% or GM at 45%. Honda’s sales fell 25%, Ford, over 30%.
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